London Interbank Mean Rate - Definition
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London Interbank Mean Rate Definition
The London interbank mean rate refers to an interest rate used in the mid-market especially in the interbank markets of London. The rate is determined by calculating the average LIBOR and LIBID rate. The LIBID which refers to the London Interbank Bid Rate is the rate at which the banks that use eurocurrency makes their financial bids. In other words, it is the rate at which banks that trade in eurocurrency are willing to are willing to borrow funds from other banks. On the other hand, LIBOR refers to the rate at which the lending banks are willing to give out finances to the borrowing banks. The LIBOR depends on the rates that are fixed by the British Bankers` Association while the LOIBID is not subjected to any control by any authority or government. Besides, the alternative rates to the LIBOR and LIBID can be used for lending and borrowing in the Intermarket. The interbank rates depict the average borrowing and lending rate of the interbank
A Little More on What is London Interbank Mean Rate
When lending out finances, the five major London banks use the LIBOR average rate to lend a given amount of finance to the lenders for a given period of time especially three or six months. The LIBOR is used as the benchmark rate that is used by the lending institutions to set interest rate for financial instruments and adjustable loan rates. The LIBOR is connected to the options trading exchange, and it is considered to be the leading feature of the Europe interbank markets. The London International Financial Futures Exchange was established in 1982 following the increase in financial trading. Ten years later, the London Traded Options Market (LTOM) emerged which changed the name but maintained similar abbreviation.Moreover, the LIBID and LIBOR are commonly used by the banks as the reference rate in the London interbank market, which is a large London`s money market that gives the banks an opportunity to exchange their currency either directly or indirectly through various platforms such as electronic trading platforms. The most common currency used in the exchange market is the US dollar. The trade mostly uses the term eurocurrency which refers to the dollars that are deposited in the banks outside US-UK, the Europe. The rates are determined daily and made available to the traders in the market.Differed from the LIBID that is not controlled by any authority, LIBOR is controlled and fixed daily the rate is published at around 6:45 a.m. EST (11:45 a.m. in London) by the IBA. In conclusion, the London Interbank Mean Rate (LIMEAN) is the mean rate between the LIBID and the LIBID and mostly used to determine the spread between the two rates. The average rate is also applied by the financial institutions to determine the borrowing and lending transactions in the mid-rate market.
References for London Interbank Mean Rate
Academic Research on London Interbank MEAN (LIMEAN) rate
Cash: The Most Liquid of All the Asset Classes, Clare, A., & Wagstaff, C. (2011). In The Trustee Guide to Investment (pp. 79-85). Palgrave Macmillan, London. This paper examines four classes of assets that form part of the traditional benefits schemes of the asset portfolio. According to the other, over a long period of time, there has been no need for traditional adjective until the introduction of four types of assets that are currently available to the financial institution investors and pension schemes. This follows the increase in the range of investment strategies and classes of assets.METHODS OF DEFINING THE INTEREST RATE AMOUNT BASED ON THE ANALYSIS OF THE DYNAMICS OF THE IGLB MARKET OF UKRAINE., Maliuzhenko, M. (2012). Research Papers of the Wroclaw University of Economics/Prace Naukowe Uniwersytetu Ekonomicznego we Wroclawiu, (263). This paper explores the approaches that are used to determine the interest rates based on the evaluation of the market dynamics in the Ukraine. The article focuses on the approaches that are used to optimize the evaluation of the interest rates by the authority that governs the loan bond of Ukraine. The optimization of the determination of the rates is based on terms of finances attractions and the entirety of the dynamics of rates in the Ukraine`s financial markets.International financial markets: a survey. Dufey, G. (1989). This paper presents a survey of the international monetary markets. The study investigates the impacts of the new financial instruments in the international financial markets. It was revealed that the introduction of the new financial instruments has significantly altered the nature of international financial trading. Besides, the study also presents that the current international financial markets are associated with the increased knowledge of the traders and the risks that may occur in the market.US BANKING IN THE ARAB WORLD, Chaloner, G. D. E. (1984). American-Arab Affairs, For a long period of time, corporations from the west tend to look for commercial opportunities in the Arabic countries, especially in the middle east. Similarly, the middle east countries also seek for a business opportunity from the US. In this regard, this paper examines the banking activities of the US to the middle east countries. The author presents that the US banks provide links between many capital markets as they try to implement imaginative financial ideas.METHODS OF DEFINING THE INTEREST RATE AMOUNT BASED ON THE ANALYSIS OF THE DYNAMICS OF THE IGLB MARKET OF UKRAINE., Maliuzhenko, M. (2012). Research Papers of the Wroclaw University of Economics/Prace Naukowe Uniwersytetu Ekonomicznego we Wroclawiu, (263).Sharp Corporation, Nomura, M. S. Sharp Corporation. This paper examines the benefits of sharp corporations in the financial markets. The author presents that bigger corporation has the advantage in the financial markets compared to the minor corporations. This is attributed to low restrictions imposed on them since they have attractive financial profiles. Euro Medium Term Note Programme, DI RISPARMIO, B. C. S. C., & IMPERIA, D. G. E. This paper examines the implications of medium-term euro loans in the financial markets. The author presents that most of the lenders and borrowers in the financial markets prefer the medium-term loans since it seems to average and affordable. The author also argues that the interest rates charged for the medium-term loans are attractive to both the lenders and the buyers thus more appropriate and common in the financial markets.The behavior of interest rates implied by the term structure of eurodollar futures, Jegadeesh, N., & Pennacchi, G. G. (1996). Journal of Money, Credit and Banking, 28(3), 426-446. This paper examines the interest rate behavior that is caused by the term structure of the features of the Eurodollar. The paper focuses on the equilibrium model regarding the term structure which is based on two stochastic aspects. These factors include target level and short-term rate of interest whereby the short rate is expected to regress. The paper also compares the features volatility of the Eurodollar and the LIBOR.